US: Arms Fiascoes Lead to Alarm Inside Pentagon

Nine years ago, the Navy set out to build a new guided missile for its 21st-century ships. Fiascoes followed. In a test firing, the missile melted its on-board guidance system. "Incredibly," an Army review said, "the Navy ruled the test a success."

Recently, the Navy rewrote the contract and put out another one, with little to show for the money it already spent. The bill has come to almost $400 million, five times the original budget.

Such stories may seem old hat. But after years of failing to control cost overruns, the most powerful officials at the Pentagon are becoming increasingly alarmed that the machinery for building weapons is breaking down under its own weight.

"Something's wrong with the system," Secretary of Defense Donald H. Rumsfeld recently told Congress.

The Pentagon has more than 80 major new weapons systems under development, which is "a lot more programs than we can afford," a senior Air Force official, Blaise J. Durante, said. Their combined cost, already $300 billion over budget, is $1.47 trillion and climbing.

In the civilian world, next-generation technologies, like cellphones and computers, rarely cost much more than their predecessors. But the Pentagon's new planes and ships are costing three, four and five times as much as the weapons they will replace. As prices soar, the number of new weapons that the American military can afford shrinks, even with the biggest budget in decades.

"We're No. 1 in the world in military capabilities," said David M. Walker, who runs the Government Accountability Office, the budget overseer for Congress. "But on the business side, the Defense Department gets a D - giving them the benefit of the doubt. If they were a business, they wouldn't be in business."

Neither the Pentagon nor Congress nor the weapons contractors have any prescription to cure the problem. But in interviews and public testimony, military leaders, arms makers and government auditors generally agreed on why the nation's arsenal costs so much.

They said the military conjures up dream weapons, like the Extended Range Guided Munition that the Navy had such trouble with. It sets immensely expensive technological requirements that are far beyond the state of the art of war, weapons executives say. Officials at the handful of major military contractors cross their fingers and promise to fulfill those visions.

Almost no one flatly rejects the wish list for weapons and requirements. The military adds new technologies to many weapons already under development. Those systems add complexity and weight, which add costs to planes, ships and tanks.

Military officials routinely understate the anticipated costs of weapons, said Winslow T. Wheeler, who analyzed armaments spending as a Senate staff member advising both Republicans and Democrats for 31 years.

When costs rise far beyond the promised ceilings, he said, almost no one takes responsibility.

Oversight is dwindling, Pentagon officials acknowledge. While the dollar value of weapons contracts doubled over the last decade, the Pentagon halved the size of the work force that polices their costs. The government work of managing the design, development and production of weapons has been largely outsourced to the weapons contractors themselves.

Technological troubles add billions to the cost of armaments, Congressional auditors said. But no one knows precisely how much, since the Pentagon often cannot keep track of the money it spends.

Testing is often unrealistic, the equivalent of an open-book exam. For example, Pentagon officials overseeing the 22-year, $100 billion effort to build a missile defense say the program has not passed realistic tests. It is an example, one among many, of daunting weapons technology taking two decades or more to produce - and time is money.

Finally, the costs of new weapons are sometimes concealed by secrecy and creative bookkeeping.

They now total nearly $148 billion a year, and almost one in five of those dollars is hidden from public view, in the classified "black budget."

Of that amount, research and development spending on new weapons has gone up 77 percent since 2000, and now totals $69 billion a year. The price of buying new weapons is scheduled to rise nearly 50 percent, to almost $119 billion annually in 2011, from $78 billion today.

"The Pentagon does get it right from time to time," Mr. Walker, the Congressional auditing chief, said. "There have been some systems where things have gone well. Unfortunately, that's tended to be the exception rather than the rule."

The military gets only a fraction of the bang for the buck it once did, the Air Force chief of staff, Gen. John P. Jumper, said. "We have got to do something about it," General Jumper said in an interview, calling for "a national debate" on the costs of weapons. The Navy's top admiral, Vern Clark, echoes that view.

Franklin C. Spinney, who spent three decades at the Pentagon analyzing the cost of weapons, said their growing costs constituted "a time bomb with a slow fuse that is now going off."

"No one has a clue what it will all cost," Mr. Spinney added.

The cost of many weapons is growing faster than the Pentagon's budget authorization of $442 billion, which has increased almost 35 percent above inflation in the last six years. "When you add money to the budget, the contractors' costs go up just as fast as you can add it," he said. "As costs go up, production rates decline," providing less value for each dollar spent.

Some members of Congressional armed services and appropriations committees have raised alarms about the Army's Future Combat System, a network of 18 weapons and vehicles for about 45,000 soldiers. First advertised at $78 billion, it may cost nearly twice that.

They worry aloud that the Navy's DD(X) destroyers are crushingly expensive at roughly $20 billion for as few as five ships. Navy requirements for the ships added thousands of tons of weight, and billions in costs.

They asked why the Air Force needed three different new jet fighters, including the F-22. That program was first sold, more than two decades ago, as 760 planes for $35 million each. It is now planned for about 180 jets, costing at least $330 million each.

Congress has continued to conduct business as usual, approving more money for more armaments programs, including some the military does not want. These include C130 transport planes, which cost 500 percent more today, adjusted for inflation, than they did in the 1980's. Lawmakers also pressed the Pentagon to spend $23 billion to lease refueling tankers from Boeing until the prosecution of senior Air Force and Boeing officials put the program on hold.

Senior uniformed officers and top military contractors pointed to the "requirements process" - the conception and birth of ideas for new weapons - as a key to the problem.

General Jumper said requirements often exceeded realities. "We have to make sure we are controlling requirements," he said. A senior executive at a major military contractor said the Pentagon had yet to impose that self-control.

The Army, Navy and Air Force "push the technology beyond what a contractor is capable of achieving," said the executive, a former weapons-buying official, who spoke on condition of anonymity.

Yet the contractors say, "We can do it!" the executive continued. "Why? Because you're competing with another guy who says he can do it."

Mr. Wheeler, the longtime Senate analyst, said the requirements system served "to feed the technological dreams of an overactive bureaucracy."

"Nobody's saying 'no' to new weapons proposals in Congress, at the uniformed military services or at the Pentagon," he said. "The system is out of control because nobody's controlling it."

After a decade of mergers and acquisitions, just a handful of military-contracting giants are left to handle the bulk of the work. Only General Dynamics and Northrop Grumman now build Navy warships.

Billions of dollars for that work are allocated between them, not competitively bid, Admiral Clark said. The danger, General Jumper said, is that concentration and consolidation could distort the costs and capabilities of Air Force planes and other multibillion-dollar armaments.

" The promise," he said, "was that the newly consolidated companies would be endowed with core competencies, and we could turn over quality control" to the contractors.

"The results have not been there," General Jumper added, raising the question of whether "leaving it all up to industry without the right oversight on costing and pricing" was a good idea. Several industry executives voiced similar doubts.

The Pentagon dismissed its own auditors in the name of "acquisition reform," Mr. Wheeler said. "They thought they were copying private-enterprise practices by removing this monitoring bureaucracy."

The old bureaucracy "was a pain in the neck to deal with," he added. "But without them, things are much worse. Things are taking even longer. Cost growth has accelerated. And performance degradations have gotten worse."

When weapons finally move from the drawing board to the assembly line, the military services employ a practice Mr. Walker calls "plug and pray." "They plug how many they can buy with the amount of money they have," he said. "Then they pray that they'll get more money in order to be able to buy more."

But by then, he warned, many weapons of the future may prove too costly to bear.

"There's no way we're going to be able to afford them," Mr. Walker said. "We're going to have to rationalize what people want and reconcile it against what we really need, and what we can afford, and what we can sustain."